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The Associated Press reports: "Federal prosecutors in New York sued Bank of America on Wednesday, accusing the giant bank of carrying out a mortgage scheme that defrauded the government."

The Bank of America is being sued by the federal government for mortgage fraud. (photo: Occupy.org)
The Bank of America is being sued by the federal government for mortgage fraud. (photo: Occupy.org)


US Suit: 'Brazen' Mortgage Fraud at Countrywide, BofA

By The Associated Press

24 October 12

 

he latest federal lawsuit over alleged mortgage fraud paints an unflattering picture of a doomed lender: Executives at Countrywide Financial urged workers to churn out loans, accepted fudged applications and tried to hide ballooning defaults.

The suit, filed Wednesday by the top federal prosecutor in Manhattan, also underscored how Bank of America's purchase of Countrywide in July 2008, just before the financial crisis, backfired severely.

The prosecutor, Preet Bharara, said he was seeking more than $1 billion, but the suit could ultimately recover much more in damages.

"This lawsuit should send another clear message that reckless lending practices will not be tolerated," Bharara said in a statement. He described Countrywide's practices as "spectacularly brazen in scope."

Bank of America had no immediate comment.

Countrywide was a giant in mortgage lending, but was also known for approving exotic, even risky, loans. By 2007, as the market for subprime mortgages collapsed, Countrywide was anxious for revenue.

The lawsuit alleged that the company loosened its standards for making loans while telling Fannie Mae and Freddie Mac, which were buying loans from Countrywide, that standards were getting tighter.

Fannie and Freddie, which packaged loans into securities and sold them to investors, were effectively nationalized in 2008 when they nearly collapsed under the weight of their mortgage losses.

To churn out more mortgage loans, Bharara said, Countrywide introduced a program called the "Hustle," shorthand for "High-Speed Swim Lane." It operated under the motto, "Loans Move Forward, Never Backward."

The program eliminated checks meant to ensure that mortgages were being made to borrowers who could afford them, according to the lawsuit.

For example, loan processors no longer had to complete worksheets that helped them assess whether income levels that borrowers entered on their loan applications were reasonable.

If processors entered a borrower's information into a computerized underwriting program and the program raised flags, employees were encouraged to change the numbers, the suit said.

It also said that bonuses were awarded based solely on the number of loans that an employee could generate, not on their quality.

The process led to "widespread falsification" of mortgage data, Bharara charged. And when Countrywide executives became aware of the dangerously high number of borrowers defaulting, it hid the problem, according to the lawsuit.

In early 2008, for example, Countrywide offered bonuses for employees who could "rebut" the high rate of defaults. The standards were low, according to the lawsuit: If a review found that the income a borrower listed on his application seemed unreasonable, an employee could rebut the finding "simply by arguing that the stated income was reasonable."

The lawsuit gives seven examples of mortgages made for homes in California, Alabama, Florida and Georgia in which the borrowers' income and other qualifications were falsified.

For example, one loan application, for a home in Miami, said that the borrower was an airline sales representative earning $15,500 per month, when the borrower worked for a temp agency and earned $2,666 per month. The borrower defaulted within seven months, the suit said.

A loan application for a home in Birmingham, Ala., failed to disclose $81,000 in debt that the borrower was carrying. That borrower defaulted within a year, the suit said.

The lawsuit accused Countrywide, and later Bank of America, of selling thousands of Hustle loans to Fannie and Freddie. The lawsuit says that that the Hustle program continued through 2009.

According to the lawsuit, Fannie and Freddie don't review loans before they purchased them. Instead, they relied on banks' statements that the loans met certain qualifications.

Bharara said the lawsuit was the first civil fraud suit brought by the Justice Department concerning loans later sold to Fannie and Freddie. When Fannie and Freddie collapsed, investors were wiped out.

Taxpayers have spent $170 billion to keep Fannie and Freddie afloat, and it could cost $260 billion more to support the companies through 2014 after subtracting dividend payments to taxpayers, according to the government.

The lawsuit says that Fannie and Freddie suffered $1 billion in losses because they had to pay for Countrywide's defaulted loans. The lawsuit also complains that Bank of America is refusing to buy back mortgages "even where the loans admittedly contained material defects or even fraudulent misrepresentations."

Bank of America's purchase of Countrywide originally earned it plaudits from lawmakers because Bank of America was viewed as stepping in to eliminate a bad actor from the mortgage market.

But the purchase, instead of padding Bank of America's mortgage business, has drawn a drumbeat of regulatory fines, lawsuits and losses.

Bank of America reported last week that while it is issuing more mortgages - $21 billion worth last quarter, up 18 percent from a year earlier - its mortgage unit is still losing money as the bank works through crisis-era problems.

In the past year and a half, Bharara's office has settled lawsuits against CitiMortgage, Flagstar Bank and Deutsche Bank over mortgages. Its lawsuits against Wells Fargo and Allied Home Mortgage are pending.

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+53 # TrueAmericanPatriot 2012-10-24 20:46
It's HIGH TIME that these CORPORATE CRIMINALS be prosecuted and sentenced to REAL PRISON terms; no country club Fed houses! You USED TO hear about PEOPLE robbing BANKS: now your hear more about BANKS robbing PEOPLE!!! Too-big-to-fail can be cut down to size. In this way, they will NOT be TOO BIG FOR JAIL!!! LOCK 'EM UP FOR A LONG STRETCH!!!!!
 
 
+22 # Tiger Claws 2012-10-24 22:08
Quoting TrueAmericanPatriot:
It's HIGH TIME that these CORPORATE CRIMINALS be prosecuted and sentenced to REAL PRISON terms; no country club Fed houses! You USED TO hear about PEOPLE robbing BANKS: now your hear more about BANKS robbing PEOPLE!!! Too-big-to-fail can be cut down to size. In this way, they will NOT be TOO BIG FOR JAIL!!! LOCK 'EM UP FOR A LONG STRETCH!!!!!


30 years in solitary at a maximum security prison. Marion Illinois federal max facility , no minimum security " retirement home" for any of them. In the 1870's we would just hang them from a lamppost in the Dakotas. We must go after the individuals not just the corporation. Their feet to the fire.
 
 
+9 # HowardMH 2012-10-25 08:58
Tiger Claws, I am totally with you on this, but the system is totally rigged in the bankers favor. They screw the stupid people and imbeciles out of $100 Million and then agree to pay a $2 Million fine and get their little pinky slapped and they are right back to doing it again. With Obama the Wimp and Holder the puppet of the Wimp both looking forward nothing is going to happen while the stupid tax payers continue to get totally screwed.
Wall Street, Wall Street, Wall Street. It is all just smoke and mirrors. Until there are two hundred thousand really, really pissed off people on Capital Hill (all at the same time – with base ball bats, 2 x 4s) raising some serious hell against the Lunatics, absolutely nothing is ever, ever going to happen to these totally bought and paid for by the richest 50 people in the world that are becoming more and more powerful with each passing rigged election thanks to the stupid people.
 
 
+22 # Billy Bob 2012-10-24 23:53
Actually some of those famous bank robbers from the past were local folk heroes because it was perceived that the banks were in collusion to rob people back then as well. Sometimes the robbers were considered "Robinhood" surrogates.

I'm sure many of the robbers just liked robbin' stuff, just like the banks they robbed.

Robbery of banks is now almost impossible to get away with, at least in the old form. I don't know much about cyber crime. On the other hand, banks are having a field-day robbing the hell out of the rest of us in ways they never could have dreamed of 100 years ago.

Much of our economy is looking increasingly like the casinos in Vegas. All's well just so long as you keep paying IN to the machine. When you start thinking of ways to get some of it back, even if it means something like lowering ATM fees, you can expect to be considered a "security risk" by some goons that come out of the woodwork.

Just ask the people of San Francisco what happens when a city enacts an ordinance making ATM fees illegal. That was ONE INSTANCE where, suddenly and uncharacteristi cally, Republicans didn't think local and state's rights were worth defending. From what I remember, those "big guv-mint" federal courts came down hard against the city of San Francisco and conservatives couldn't have been more pleased.

Conservatives only hate federal laws when they tell states they can't allow slavery.
 
 
+9 # RLF 2012-10-25 04:59
It is time the government regulated the banks so they can't steal us blind instead of wait and then sue so they get money and we're out of luck. This is taxation, not protection against predation.
 
 
+13 # DPM 2012-10-24 22:11
The only financier that has, or will, see jail time, is poor ole Bernie Madoff. His biggest crime wasn't the Ponzi scheme he ran, it was taking money from the wealthy. THAT'S a definite "no-no".
 
 
-7 # Human Right 2012-10-24 23:13
Ya, sue the Bank of America because you don't have the intestinal fortitude to sue the Ashkenazim Federal Reserve. Nobody in Washington DC will sue them because they are afraid of them.
 
 
+4 # dkonstruction 2012-10-25 11:47
Quoting Human Right:
Ya, sue the Bank of America because you don't have the intestinal fortitude to sue the Ashkenazim Federal Reserve. Nobody in Washington DC will sue them because they are afraid of them.


Right, it's the "Jewish bankers" (Ashkenazim) who are responsible for all of our economic woes. Your tired, worn out anti-semitic myth is duly noted.
 
 
+3 # David Starr 2012-10-25 12:18
@Human Right: Since Bank of America and CountryWide, specifically committed the criminal acts themselves, why not go directly after them? Or would it be a case of ONCE AND FOR ALL ending mortgage fraud, among other acts, by either changing the Feds rules, or enforcing them more; or dissolving the Fed entirely?
 
 
+19 # Billy Bob 2012-10-24 23:39
Yahoo automatically put the email from RSN that included this article in my "trash" folder. I know it was because of this article, because it put an email from Truthout in the "trash" early today for containing a different article about the same subject.

ANY time yahoo automatically puts an email in my "trash", it ALWAYS contains one of two subjects:

1. OWS
2. something accusing banks of fraud.

Anybody else see a pattern here? Yeah, I thought so. I'm just a "paranoid liberal".

Yahoo just says it's a "bug" and their trying to "fix it".

Yeah, they're BUGGING MY EMAIL, and their TRYING TO "FIX" WHAT I'M ALLOWED TO HEAR, DISCUSS AND THINK.

-----------------------------------------

An aside note: How many conservatives think "big government" is the problem? Afterall, it's only "big government" that snoops on us and tells us what to think, right? "Coincidentally ", the bankers and the right-wing press (e.g. Yahoo/AP) hate "big government" as well. ALSO "coincidentally ", "big government" is perceived as a threat because it often comes down in the form of REGULATION against BIG BUSINESS.

Then again, I'm just a paranoid liberal. I'm one of those who sees obvious patterns I'm not supposed to when they're staring me right in the face.
 
 
+1 # David Starr 2012-10-25 12:23
@Billy Bob: Has Yahoo revealed themselves at all, or further, as having consistently taken a political side, such as the right? I ask because I really don't much about them in the first place.
 
 
0 # Billy Bob 2012-10-25 13:52
As far as news is concerned, Yahoo is the same thing as the AP. Remember when the AP had a sterling reputation for being non-partisan?

One thing I do know is that their former Washington bureau chief, Ron Fournier, who did that job from 2008 to 2010 was a known partisan. Before he became the bureau chief he had been approached by McCain to work on his campaign in 2006. In 2008 he notoriously quoted several mccain/palin talking points verbatim as though they were objective facts.

I don't know anything else specific about WHY they're still doing this. I don't really need to hear them admit it out loud however. Their headlines have become like the running ticker at the bottom of the screen during a fox "news" broadcast.
 
 
0 # David Starr 2012-10-26 12:08
@Billy Bob: Thank you for the summation on Yahoo. Interesting how the right crawls in and out of the political woodwork. "Fumigation" is needed.

Yeah, I was skeptical of AP years ago.
 
 
+8 # MainStreetMentor 2012-10-25 06:04
I hope the investigation provides unshakable, unchallengable evidence. I hope the banks (they are "people" don't forget as defined by the Supreme Court) are found guilty - but I want absolutely an "air-tight" case, so the banks cannot "wiggle" out via some legal maneuvering, of what punishment they deserve. I hope too, that individuals bank execs are brought to trial as a result of this investigation. Jail time, not pay-time, is the ONLY justice.
 
 
+8 # Eliza D 2012-10-25 06:17
Banks have gotten 170 billion in taxpayer bailouts (actually the true number is closer to 15 trillion),but 47% of Americans are whining victims who try to squeeze all they can from Uncle Sam, according to Mitt Romney. Non sequitur extraordinaire.
 
 
+8 # fredboy 2012-10-25 06:19
Amazed that shareholders haven't brought down the entire management and board for buying Countrywide AFTER the mortgage nightmare was known. It was like BOA wanted to infect itself, and this lawsuit alleges just that. As an attorney and former business prof, I view this as one of the dumbest business decisions of the century or one of the most ruthless.
 
 
+5 # natalierosen 2012-10-25 07:28
These criminals need to be NOT ONLY civilly prosecuted which will cost them chump change BUT criminally prosecuted sharing to share a cell with Madoff!
 
 
+4 # doneasley 2012-10-25 08:08
Quoting natalierosen:
These criminals need to be NOT ONLY civilly prosecuted which will cost them chump change BUT criminally prosecuted sharing to share a cell with Madoff!


Natalie, Madoff's in a cell only because he robbed the rich. You don't go to jail if you rob poor and middle class folks. BOA will get FINES ONLY, which they'll be able to write off on their taxes.
 
 
+1 # ghostperson 2012-10-25 15:14
Or have the amount paid for by liability insurance as was done in the Exxon Valdez case so that the perps had no out of pocket consequences.
 
 
+7 # dkonstruction 2012-10-25 07:49
These lawsuits are ultimately just a side-show spectacle meant to snow the general public that the gov't is "getting tough" on the banks when in fact whatever fines/penalties are levied become simply a minor annoyance and cost of doing business.

At what point does systemic criminality mean that a business should no longer be allowed to operate and should be seized as other "organized crime" enterprises are seized by the gov't? These "too big to fail" institutions have perpetrated the largest financial fraud in world history (and this isn't hyperbole if we include not only the mortgage/subpri me stuff but also the recent revelations about manipulating the LIBOR rates) and have been responsible for the immiseration of literally hundreds of millions if not billions around the world including needless deaths due to hunger brought on by the manipulation of food prices (through commodity speculation also perpetrated by the large financial institutions). In other words this is not just about fraudulent loans or theft but also mass murder.

Since corporation's are now people these perpetrators of financial crimes of mass destruction should be punishable by death and should be seized by the gov't and turned into publicly owned and controlled financial institutions.
 
 
+2 # ghostperson 2012-10-25 15:17
China executes white collar criminals. We reward ours. Unless there are personal, criminal consequences, there is will never be a deterrent to such behaviors. The institutions must also face draconian consequences.
 
 
+1 # Kootenay Coyote 2012-10-25 09:33
So much for Bankster ethics, eh? & let’s not idly & naively suppose this is the only bad firm....
 
 
+3 # walt 2012-10-25 10:02
This is fine but long overdue and only deals with a portion of the real crimes.

Why has it taken so long and happened only after many huge petitions and demonstrations?

People must remain vocal and outspoken and insist that government defends their rights. If Romney is ever elected, we can forget that since then we would become completely the USA, Incorporated.
 
 
+2 # ghostperson 2012-10-25 15:12
I wish that I could find comfort in the suit but since Big Business owns the government, courts have been stacked with pro-business conservatives and "settlements" most often are so watered down that they aren't even a slap on the hand, I simply can't conjure up enough faith to even allow myself to hope that the worm is really turning, as much as I would like it too. A classic of how Homeric devastation is wiped off the judicial books was the Exxon Valdez suit. Read Greg Palast's description of the events in "The Best Democracy Money Can Buy." The Kochs similarly polluted the river systems of 6 states and escaped with minimal damage to their pocket books and certainly no restraint on continuing harmful practices. We can always hope...
 
 
+2 # fredboy 2012-10-25 15:15
I love the fact that the BOA is in Charlotte, the "belt buckle of the Bible belt," where there is a church on every corner but not a true Christian to be found. Just meek, silent lemmings.
 
 
0 # Billy Bob 2012-10-25 16:48
I thought Dallas was the "buckle". I've also heard Oklahoma City was. I know there's a small town in Texas (near Dallas) with more reverends than laypeople.

Texas is also the most corrupt state in the union, although Florida is close.
 

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